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THE MINISTRY OF PLANNING AND INVESTMENT- THE MINISTRY OF FINANCE

JOINT CIRCULAR No. 06/1998/TTLT-BKH-BTC OF AUGUST 14, 1998 GUIDING THE MANAGEMENT OF RECIPROCAL CAPITAL FOR ODA-FUNDED PROGRAMS AND/OR PROJECTS

Pursuant to Articles 13 and 14, Chapter III of Decree No. 87-CP of August 5, 1997 of the Government promulgating the Regulation on the Management and Use of Official Development Assistance (ODA);

Pursuant to the Law on the State Budget and legal documents guiding the implementation thereof;

The Ministry of Planning and Investment and the Ministry of Finance hereby jointly provide guidance on the management of reciprocal capital for programs and/or projects funded by official development assistance (ODA) capital sources as follows:

I. GENERAL PROVISIONS

1. The management and planning of reciprocal capital for programs and/or projects using ODA capital sources (hereafter referred to as ODA programs and/or projects for short) are aimed to materialize the commitments between the Vietnamese Government (hereafter referred to as the Vietnamese party for short) and the governments of foreign countries, international organizations and inter-governmental organizations (hereafter referred to as the foreign party for short) in the implementation of ODA programs and/or projects.

2. Reciprocal capital means the domestic capital contributed to a specific ODA program or project as committed between the Vietnamese party and the foreign party, on the basis of investment agreements, project-related documents and/or decisions issued by the competent agencies.

The reciprocal capital shall not apply to loans and non-refundable aids, which is not specified in the relevant agreement, for contribution by the Vietnamese party. In such cases, foreign capital sources shall be made the fullest use of for the implementation of projects. For a number of projects requiring domestic investment capital as stated in their investment decisions, balances shall be made periodically according to the capital resources in the annual plans assigned by the State to the ministries and localities.

3. All ODA programs and/or projects that require reciprocal capital as mentioned in Point 2, Item I shall annually have to work out the reciprocal capital plans. The ministries, the agencies attached to the Government, the People's Committees of the provinces and centrally-run cities shall have to sum up the reciprocal capital requirements of the programs and/or projects under their direct management.

In order to fulfill the commitments in the already concluded agreements, sufficient amount of reciprocal capital shall be arranged in the annual local budget estimates.

For the ministries and branches, the reciprocal capital shall be balanced in their respective annual budget estimates.

In principle, the reciprocal capital for ODA programs and/or projects managed by any levels, such levels shall arrange it in their respective budgets. For some localities where reciprocal capital amounts are too large, going beyond their balancing capability, they shall have to report thereon to the Prime Minister for partial support.

4. Sources of reciprocal capital for ODA programs and/or projects shall include:

- State budget capital, covering non-business expenditures and concentrated capital construction expenditures, which have already been prescribed in the investment decisions. Based on the investment decisions, a part or the whole of reciprocal capital of ODA programs or projects may be allocated by the State budget (according to the two above-mentioned budget expenditures).

- Credit capital sources: The State shall spare part of the credit capital under the State plans as loans to investors for their reciprocal capital to ODA programs and/or projects, based on the foreign-capital sub-lending contracts signed between the investors and the Ministry of Finance. Investors who borrow credit capital shall have to repay it (both principal and interests) in strict compliance with the lending contracts. The Ministry of Finance shall allocate capital only to make up for the difference of interest rates (between the borrowing interest rate and the lending interest rate).

- Self-mobilized capital of State enterprises, including the capital depreciation of immovable assets bought by the State budget, the after-tax profits, the commercial loans, the capital mobilized from the population, etc., so as to arrange reciprocal capital for ODA programs and/or projects, which must be balanced by investors themselves as prescribed in the investment decisions.

- Capital sources mobilized from people of different strata, including labor contributions, for balancing reciprocal capital for ODA programs and/or projects (regarding the investment programs and/or projects to be implemented jointly by the people and the State).

II. SPECIFIC PROVISIONS

1. ODA programs and/or projects with reciprocal capital to be balanced shall be included in the annual plans elaborated by the ministries, the agencies attached to the Government and the People's Committees of the provinces and centrally-run cities.

A reciprocal capital plan must be mapped out simultaneously with the foreign capital disbursement plan for ODA programs and/or projects. By July annually, the ministries, the agencies attached to the Government and the provinces and centrally-run cities shall assess the capability of disbursing foreign capital, review the implementation of the yearly reciprocal capital plan and work out the reciprocal capital plan for each ODA program or project in the following year's plan, then report them to the Ministry of Planning and Investment and the Ministry of Finance.

A reciprocal capital plan must ensure the time schedule pledged with the foreign party and at the same time fit the situation and the actual implementation capability.

All demands for State budget reciprocal capital must be included in the budget estimates according to the order of drafting and deciding the State budget provided for in the Law on the State Budget and the sub-law guiding documents.

2. Conditions for the reciprocal capital to be balanced with State budget's investment capital for concentrated capital construction:

- ODA programs and/or projects which have been signed and become effective before July of the current year and shall be included in a list of projects of the following plan year.

The volume and implementation tempo of work stated in the signed programs and/or projects or the volume and implementation tempo of work already adjusted as agreed upon with the foreign party shall serve as one of the bases for considering the balancing of reciprocal capital with the State budget's investment capital for concentrated capital construction.

- ODA programs and/or projects with balanced reciprocal capital originated from investment capital for concentrated capital construction shall have to fully comply with the procedures stipulated in Decree No.42-CP and Decree No.43-CP of July 16, 1996; Decree No.92/CP and Decree No.93/CP of August 23, 1997 of the Government as well as other guiding documents issued together with the said Decrees.

3. A reciprocal capital plan must detail the allocation of capital according to its sources: budget capital for non-business expenditures, budget-allocated investment capital for concentrated capital construction, credit capital under the State plans, capital mobilized by State enterprises, capital borrowed from other sources and capital mobilized from people of different strata (including the labor mobilization). The reciprocal capital plan must be made according to the set form.

4. The reciprocal capital being State budget's investment capital for concentrated capital construction must be stated in the annual plan on investment in the concentrated capital construction according to each ODA program or project and compatiable with the investment decision and the ratified estimate.

5. The reciprocal capital plans shall be assigned together with the annual plan norms and constitute part of the annual State budget estimates of the ministries, the agencies attached to the Government as well as the People's Committees of the provinces and centrally-run cities. Basing themselves on the assigned plans, the ministries, the agencies attached to the Government as well as the People's Committees of the provinces and centrally-run cities shall re-assign the plans to the investors.

In order to fulfill the reciprocal capital commitments, priority should be given to the full and prompt arrangement of reciprocal capital into the annual budget plan for programs and/or projects which are entitled to the State budget capital before arranging other expenditures.

6. To exercise the State management over reciprocal capital sources according to the current financial mechanism. The project owners shall have to use reciprocal capital sources efficiently and for the right purposes.

The ministries, the agencies attached to the Government as well as the People's Committees of the provinces and centrally-run cities shall, when assigning plans to their attached units, have to assign the right names of the programs and/or projects in accordance with the provisions of the Law on the State Budget.

7. After acknowledging the assigned plans, the ministries, the agencies attached to the Government as well as the People's Committees of the provinces and centrally-run cities shall implement the plans and register them with the related financial and planning agencies.

Basing themselves on the nature of the reciprocal capital (being the investment capital for capital construction or non-business capital), the provincial/municipal Finance-Pricing Departments or Investment & Development Departments shall notify the project owners of the capital allocation plans.

8. The allocation of reciprocal capital shall comply with the current regulations on capital allocation (the regulations on the allocation of investment capital and the regulations on the allocation of non-business expenditures shall apply to the investment capital and non-business capital respectively).

- The allocation of reciprocal capital for both capital construction expenditures and non-business administrative expenditures must be based on the capital disbursement tempo of each project while the payment of reciprocal capital shall be based on the completed work volume as well as the capital disbursement tempo of the project. In case of the temporary advance allocation, it is necessary to base oneself on the detailed provisions of the contracts between the project owners and the contractors.

- Once every month, quarter, 6 months, 9 months and every year, the project owners shall have to make comprehensive reports on the project implementation; and the ministries, the agencies attached to the Government as well as the provinces and centrally-run cities shall sum them up and report to the Ministry of Planning and Investment, the Ministry of Finance and the General Department of Statistics.

9. On final settlement:

The reciprocal capital of the programs and/or projects shall be summed up into the annual budget final settlement of the central-level agencies and localities in accordance with the current regulations.

Upon the completion of each program or project, the reciprocal capital must be summed up in the final settlement report of such program or project.

III. IMPLEMENTATION PROVISION

This Circular takes effect 15 days after its promulgation. The earlier provisions contrary to this Circular shall cease to be effective. In the course of its implementation, any arising problem should be reported to the Ministry of Planning and Investment and the Ministry of Finance for study and supplements.

Minister of Finance

NGUYEN SINH HUNG

Minister of Planning and Investment

TRAN XUAN GIA